"Colour Coded"

September 29th, 2014
in aa syndication

Age of Wisdom, Age of Foolishness (44)

Written by , KeySignals.com

The global geopolitical crisis moved from imagery to colour coding last week; in order to help colour the judgement of a general public which has become confused by the constant attacks on their senses in the media. The tempo of these attacks seemed to build as the days elapsed before the main event of the NATO summit in Wales; which was seemingly supposed to find solutions to these issues.

Follow up:

“The Man from Del Monte, He say No Strategy.”

President Obama chose to use the colour taupe for his coded message. The message however was garbled. Age of Wisdom, Age of Foolishness (40) Candide [i] started to analyse President Obama’s rapidly deteriorating legacy. This legacy was not helped by his sartorial elegance, which contrasted with the lack of diplomatic elegance in his pronouncement that there is “no strategy yet” on ISIS[ii]. There is a strategy, however the President could not utter this in public. This strategy was observed in Age of Wisdom, Age of Foolishness (41)

“One can thus only conclude that the real strategy is to dismember Iraq; but to do so in a deliberately confused manner which cannot be clearly understood for obvious political reasons.”

Age of Wisdom, Age of Foolishness (43) The Wild Geese (Chase) amended this conclusion to include the dismemberment of Syria also. The President has walked into yet another foreign policy trap, by getting caught out by his own strategy.

The trap seemed to be sprung, when another American was beheaded by ISIS; with the threat that a Briton would be next[iii].

Age of Wisdom, Age of Foolishness (43) “The Wild Geese (Chase)” suggested that:

“America therefore intends to fight ISIS by proxy.”

The President confirmed that this “proxy” tactic was being rolled out; in a press conference about the latest beheading when he opined that a “regional coalition” should be created to fight the extremists[iv].

Some readers didn’t understand the connection between “boots on the ground” in Ferguson, but the lack of “boots on the ground” in foreign theatres of war outlined in Age of Wisdom, Age of Foolishness (43) “The Wild Geese (Chase)”.

“Offender Funded Revenue Model.”

The connection between the two is debt, or rather the US Budget Deficit to be precise. Political gridlock has created fiscal austerity and an improving Federal Budget Deficit. At the city level however, austerity is having some dangerous social and political consequences; for cities which do not have specific economic growth drivers. Enterprising city treasurers have started to use their law enforcement system as a tax revenue source. This new source of revenue seems to have exploded, even as the Fed was exploding its asset purchases; so clearly the Fed’s liquidity is not trickling down to the cities.

This form of taxation would be palatable if it were progressive; however as has been found in Ferguson, it is extremely regressive. The “Offender Funded Revenue Model”, now in operation in a growing number of American cities, threatens to unleash further social unrest. What is most interesting about Ferguson, is that its new revenue model ramped up, during the alleged recovery and whilst the Fed’s balance sheet was ballooning. One wonders if the FOMC’s “range of indicators”, made famous by Janet Yellen at Jackson Hole, has inputs from this emerging revenue model.

It is therefore imperative that the Federal Budget swings back into serious deficit, associated with foreign military adventures. Not only is there a foreign threat, to divert attention from the domestic threat; but there is also a place to divert the “boots on the ground” to.

Dick Cheney is famous for saying that “deficits don’t matter”; surpluses matter because they lead to social unrest. The Fed will also have more US Treasuries to monetize, as collateral for the permanent increase in the money supply, to then redistribute to the current targets of the “Offender Funded Revenue Model” through a reformed tax code.

By appearing not to have a strategy, the President was prompting the old Colonial Mandates in the Middle East to resolve the current situation; in order for the American Pivot towards China to continue. The British Colonial Mandate is facing the obstacle of the upcoming General Election in 2015. The French Colonial Mandate is subsumed under the wider mandate of the European Union, which is currently fighting for its own survival.

The architects of Sykes-Picot therefore face significant barriers; which prevent them from responding with alacrity. There are signs however that this democratic inertia may be overcome, as the western media amplifies the sense of threat to the European Project. In Age of Wisdom, Age of Foolishness (43) “The Wild Geese (Chase)” it was suggested that the upcoming NATO Summit in Wales would provide the opportunity to create some momentum for the military interventionists. The escalation in tensions in Ukraine and Iraq have accelerated the process.

“Not So Pretty In Pink.”

Britain, the host nation, provided the catalyst by raising the terrorist threat level to the second highest possible; on the basis of specific information provided from Syria[v]. The threat level is now “Severe”; which means an attack is “highly likely”[vi]. Raising the threat level to this coordinate, allows the national security services to maintain an image of competence whilst also building up the state of paranoia amongst the population. If an act of terror does occur, the intelligence services can therefore avoid direct criticism for missing it, whilst accruing credibility for being close to the mark. The population is therefore convinced that action must then be taken in the form of military intervention.

“Green Light in Calais, Red Light in Dover.”

Whilst the delegates were meeting in Newport in front of the cameras, British media also broadcast a sudden acceleration in the number of immigrants trying to escape across the Channel from Calais. A cursory look at these unfortunate people, shows them to be from the very same conflict zones currently being discussed by NATO. The sublime message is that regime and system change in these countries is required to stem the tide.

“The Smoking Gun.”

A rather less subtle initiative, taken by the intelligence community, was the leak of an alleged ISIS laptop[vii]; which reads as a database of potential acts of terror and terrorist personnel. Such a find would logically be expected to be of the most classified level, in terms of confidentiality and secrecy. Why its contents were then published, can only mean that its true value is evidential rather than strategic. Presumably the laptop and the raising of the UK threat level are connected; confirming its evidential value.

“Green For Go to Kurdistan.”

After having been given the green light, by Houston District Court Judge Grey Miller[viii], to proceed towards the creation of the oil producing nation of Kurdistan, its leaders took another giant step forward. The Kurdish political leadership will now use the proceeds of its oil sales to provide humanitarian aid to Kurdish refugees[ix]. In practice, this means that the Kurdish oil revenues will now no longer be diverted back to the Iraqi Oil Ministry; and will instead be used to build a nation, through the process of the humanitarian provision of welfare and security. Since America is well supplied with Shale Oil, Europe stands to be the main beneficiary of Kurdish statehood. In Age of Wisdom, Age of Foolishness (42) “Level 3”it was observed that:

“Presumably, if Putin pushes back strongly the EU will push further into Iraq and vice versa.”

European solidarity in the face of Russia, had been questioned in Age of Wisdom, Age of Foolishness (40) “Candide”[x]; when France was observed weighing up the pecuniary rewards to be gained from the EU, by cancelling the sale of its warship to Russia, versus the immediate loss of revenue from the sale. There are signals that European solidarity has taken precedence over French pecuniary motives; as France is now understood to be reviewing the sale of the ship[xi]. Presumably the new thaw in German attitudes to European economic stimulus is factoring into French calculations.

“Revenge is a dish best served cold.”

A recent “kiss and tell” book, by Hollande’s jilted ex-wife, suggests that the President has no empathy with the poor[xii]; so French economic reform is clearly coming as was suggested in Age of Wisdom, Age of Foolishness (43) “The Wild Geese (Chase)”.

“Liaison Dangereuse.”

The agent of this reform will be the Rothschild’s man Emmanuel Macron.

Currently Putin is pushing back very strongly in Eastern Ukraine; so the green light in the Kurdish region will balance the red light in Ukraine and allow the EU to drive on. The EU has responded to this Russian incursion with tougher sanctions, running the risk of Russian oil and gas supply cuts just as the winter season approaches. Alternative energy sources for Europe are now imperative. Kurdish supplies look well positioned, as do those from Israel’s Leviathan field.

In response to what has been classified as a Russian incursion, Ukraine would now like to join NATO[xiii]. In response to the EU response, Putin would now like to talk about South Eastern Ukraine statehood[xiv]. In response to Putin’s response to the EU’s response, the EU elected Donald Tusk as its President[xv]. With a Pole as its President, there can be no doubt that the EU’s focus is on its eastern borders and the threat from Russia.

This threat has been exaggerated by the political vacuum that Tusk leaves in Polish politics, with no obvious replacement for him. The EU has therefore destabilised Poland, deliberately or otherwise, so that its weakness will now invite Russian attention. The EU has therefore created a self-fulfilling prophecy in relation to its focus on threats from the East therefore. Once again Poland represents the line in the sand; which once crossed by a dictator invokes a chain of events which culminates in war.

In Age of Wisdom, Age of Foolishness (43) “The Wild Geese Chase”, it was alleged that Germans have given the green light to greater support for the European Project. It was said that:

“As hostilities have emerged with Russia and also in the Middle East however, Germans have suddenly started to feel more European and less German.”

The state elections in Saxony last week, evinced this change in German political behaviour[xvi]. Angela Merkel’s CDU emerged with greater control, however the anti-immigrant parties and the Eurosceptic Alternative for Deutschland strengthened their regional representation. German paranoia at the state level manifests itself as an anti-anything that is not German protest vote; which signals the fear of Russia and militant Islam. The surge in German refugees[xvii] is provoking the paranoia. The overwhelming support for Merkel however shows that she is trusted to work on Germany’s fears, through the larger multilateral vehicle of the EU.

Germans have therefore accepted that the EU and the Eurozone must survive in order to solve their own parochial strategic vision. Merkel must now convince Germans to be pro-active in foreign policy; and allay the fears of international observers, to accept that this time around a German pro-active foreign policy is something to embrace rather than to resist. German “mission creep”, under the umbrella of the EU and NATO should be something that will be acceptable to allies and Germans.

The NATO umbrella was unfurled last week, with the intentions and capabilities to create a 4,000 strong rapid reaction force, for operations envisaged from the Baltic to the Black Sea[xviii]. Russia immediately responded by signalling that all of its current military doctrine was under review[xix].

As a consequence of the deterioration in relations between Russia and its European trade partners, President Putin is now forced to grant China greater access to the economic value in Russian energy projects[xx]. It should however be noted that China is not just picking Russia off. In the spirit of the BRIC’S cooperation agreement at the Fortaleza Summit, China is also targeting western companies for trade sanctions; which have now been flagged by America[xxi]. Media censorship of western content is also increasing in China[xxii].

“Greed is Good.”

Seemingly, the censored material is being replaced with propaganda of the kind currently being broadcast by the state-controlled media, extolling the virtues and return potential of Chinese equities[xxiii]. Policy makers are clearly keen to head off the story, of a debt-financed bubble, which the western press is beaming through the aether.

“There’s No B or I in BRIC.”

Brazil is currently undergoing Presidential elections; which may see Rousseff replaced; and hence commitment to Fortaleza reversed. India is also sitting on the fence. Ostensibly it has joined with China in turning its back on the western stranglehold on global economic development, in the form of the United Nations Panel on Climate Change (UNPCC), by avoiding the next summit[xxiv]. The conclusion is that India (and China) will now be driving growth with their own dirty coal reserves; in addition to exploiting cheap oil and gas from Russia which Europe has sanctioned.

Since Modi’s election and the drift back towards protectionist policies and domestic subsidies, foreign investment and technology transfers have stopped. Modi therefore seized upon the opportunity of the latest visit by Prime Minister Abe to reset his image. He was opaquely critical of what he saw as emerging “expansionist” tendencies[xxv]; which some thought referred to China but could equally apply to Russia. There is therefore a large question mark over India’s commitment to Fortaleza right now. If he is rewarded by the non-BRIC financial community with inward investment, presumably his commitment to Fortaleza will diminish even further.

Modi may also be pushed off the fence, onto the western side, by the latest green light for the original Al Qaeda’s Jihad; which it claims will roll out on the Indian sub-continent[xxvi]. One feels that the pressure is now on India to decide if it will remain part of the civilized nations of democracy or join the putative dictatorships. A direct Islamic threat to Indian democratic values has now conveniently emerged, as was the case in the Arab world, to help PM Modi decide.

The US Housing market is on amber; however it is uncertain whether it will go into the red or green next. This uncertainty is exemplified by the New Home and Existing Home Sales Data.


New Home Sales Data from RealtyTrac shows home sales continuing to fall in July.


Existing Home Sales Data from the National Association of Realtors shows home sales rising for the same period however. There is a clear divergence between New Home Sales and Existing Home Sales. What seems to be happening is that asking prices are cooling, which is speeding up transaction volumes in the existing sector. Builders are however seeing this cooling of prices and cutting back on sales to support prices in the new homes sector. There is also divergence within the price points.


The high end of the market has boomed with QE until recently. The high end of the market is now experiencing declines, as is the low end. The median price range is still experiencing growth. The whole picture is of a housing market in transition from recovery to sustainability. The froth from QE is now coming off the high end; and the median to low end is now entering a process; where homeowners protected by QE and modification programmes, are starting to realise the fact that they still cannot afford their mortgages. A shock from rising interest rates as the Fed exits, or a growth shock from global geopolitical headwinds would shatter this transition phase. It is therefore unlikely that Yellen will gamble on rising interest rates at this point in time.

“Draghi and Jensie”
Age of Wisdom, Age of Foolishness (41) “Axes of Evil”

Age of Wisdom, Age of Foolishness (41) “Axes of Evil” began to trace the steps of cooperation between Draghi and Weidmann over economic reform in return for monetary reward. The European green light on this grand bargain, signalled by Draghi at Jackson Hole, was observed in Age of Wisdom, Age of Foolishness (43) “The Wild Geese (Chase)”, which suggested that:

"Germany will allegedly ease up on austerity and approve ECB QE, in return for European countries applying supply side reforms to their economies.”

The latest Purchasing Managers’ Indexes in the Eurozone underlined this new direction in policy[xxvii]. PMI data in the countries that have applied painful economic reforms, namely Ireland and Spain, have outperformed those in countries which have not, namely France and Italy. Both Draghi and Germany can therefore default to this data when reinforcing the new strategy upon resentful Frenchmen and Italians. In fact this default was underlined by Sabine Lautenschlaeger; who made it clear that too much focus was being placed on Draghi’s expected QE, rather than the economic reform which it is conditional upon[xxviii]. Her comments lend direct support to the suggestion, that a grand deal has been done on QE in return for supply side reform, made in Age of Wisdom, Age of Foolishness (43) “The Wild Geese (Chase)”.

This suggestion was more emphatically underlined by the ECB’s “unexpected rate cut”[xxix] last week; which was quickly followed up with Draghi’s further announcement that targeted Asset Backed Security purchases are on the way[xxx]. Weidmann dissented on the move and is not in favour of QE[xxxi]; however his position should not be seen as outright rebellion. Weidmann, ably assisted by his fellow countryman Lautenschlaeger, is dragging his heels as a negotiating tactic in order to make sure that the quid pro quo of supply side reforms is undertaken; before the speculators take the benefits of QE as they have done in the US and leave an asset bubble which does not reflect the real economy.

If and when the supply side reforms are delivered, unanimity at the ECB will mean that far less QE is needed because the signal is stronger. It will be interesting to see if Wedimann advocates more banking consolidation, to strengthen Europe’s overbanked and under-capitalised banking system, as part of the economic reform. To make sure that reform goes smoothly, no doubt German banks will be the uber-consolidators; after national governments within each country have tidied up their banks’ balance sheets with their own taxpayers’ money first!!! The National Resolution Mechanism is destined to drag on, before anything is done at the European level therefore; which just means that Draghi has to ease even further and stay easy for even longer until the politicians get their act together.

  1. http://econintersect.com/a/blogs/blog1.php/candide
  2. http://nation.foxnews.com/2014/08/29/no-strategy-gift-wrapped-gaffe-has-exposed-obama
  3. http://www.mirror.co.uk/news/world-news/steven-sotloff-beheading-live-isis-4155323
  4. http://www.bloomberg.com/news/2014-09-03/obama-says-regional-coalition-needed-to-stop-extremists.html
  5. http://www.bloomberg.com/news/2014-08-29/u-k-terror-threat-level-raised-to-severe-on-new-intelligence.html
  6. https://www.gov.uk/government/news/threat-level-from-international-terrorism-increased
  7. http://www.foreignpolicy.com/articles/2014/08/28/found_the_islamic_state_terror_laptop_of_doom_bubonic_plague_weapons_of_mass_destruction_exclusive
  8. http://www.bloomberg.com/news/2014-08-26/kurds-get-seizure-order-thrown-out-for-texasx-oil-tanker.html
  9. http://www.upi.com/Business_News/Energy-Resources/2014/08/29/Kurds-raise-oil-funds-for-refugees/5841409321570/
  10. http://econintersect.com/a/blogs/blog1.php/candide
  11. http://www.bloomberg.com/news/2014-09-03/france-said-to-weigh-cost-of-ditching-russia-mistral-deal.html
  12. http://www.dailymail.co.uk/news/article-2741778/Trierweiler-took-one-pill-Hollande-s-affair-French-president-humiliated-extracts-Rottweiler-s-explosive-book-relationships-released.html
  13. http://www.bbc.co.uk/news/world-europe-28978699?utm_source=Worldcrunch+Newsletter&utm_campaign=4837b88b34-New_Announcement_9_10_2013&utm_medium=email&utm_term=0_a844a2c41c-4837b88b34-289643133
  14. http://www.bloomberg.com/news/2014-08-31/ukraine-vessels-attacked-as-new-eu-russia-sanctions-loom.html
  15. http://www.bloomberg.com/news/2014-08-31/tusk-mixes-charm-with-pragmatism-as-first-easterner-to-lead-eu.html
  16. http://www.bloomberg.com/news/2014-08-31/merkel-s-cdu-wins-eastern-state-vote-as-anti-euro-party-surges.html
  17. http://www.bloomberg.com/news/2014-09-01/merkel-s-generosity-tested-by-surge-in-german-refugees.html
  18. http://www.theguardian.com/world/2014/sep/01/nato-high-readiness-spearhead-force-counter-russian-threat?CMP=EMCNEWEML6619I2
  19. http://rt.com/news/184376-russia-military-doctrine-nato/?utm_source=Worldcrunch+Newsletter&utm_campaign=a8474d3ed5-New_Announcement_9_10_2013&utm_medium=email&utm_term=0_a844a2c41c-a8474d3ed5-289643133
  20. http://www.bloomberg.com/news/2014-09-02/putin-offer-to-sell-assets-to-china-to-aid-cnpc-sinopec.html
  21. http://www.bloomberg.com/news/2014-09-02/u-s-companies-say-china-subjectively-enforcing-laws.html
  22. http://www.bloomberg.com/news/2014-09-04/china-said-to-limit-foreign-tv-content-on-streaming-websites.html
  23. http://www.bloomberg.com/news/2014-09-03/china-s-state-media-join-brokerages-saying-buy-equities.html
  24. http://www.bloomberg.com/news/2014-09-03/xi-and-modi-said-to-skip-un-climate-summit-later-this-month.html
  25. http://www.firstpost.com/world/modis-expansionist-remark-chinese-media-warns-india-japan-united-front-1693639.html
  26. http://www.bloomberg.com/news/2014-09-04/al-qaeda-head-al-zawahiri-announces-start-of-operations-in-india.html
  27. http://www.bloomberg.com/news/2014-09-03/spain-outperforming-euro-area-boosts-draghi-s-case-for-reforms.html
  28. http://articles.economictimes.indiatimes.com/2014-09-03/news/53522876_1_structural-reforms-jackson-hole-price-stability
  29. http://www.bloomberg.com/news/2014-09-04/ecb-unexpectedly-cuts-interest-rates-as-outlook-darkens.html
  30. http://www.bloomberg.com/news/2014-09-04/draghi-says-ecb-readying-sizable-abs-purchases-after-rate-cut.html
  31. http://www.bloomberg.com/news/2014-09-04/draghi-sees-almost-1-trillion-stimulus-with-no-qe-fight.html

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